Business owners need to be very careful that they are withholding source deductions correctly says Edmonton bookkeeping. Along with that, that they are remitting them to Canada revenue agency correctly as well. The reason why, is because CRA views this as one of the most serious things that entrepreneurs could do incorrectly. As a result, it is the stiffest penalty that they hand out, if entrepreneurs end up doing this incorrectly. They do that in order to act as a deterrent, to ensure that business owners are appropriately withholding source deductions, and submitting them to Canada revenue agency in a timely manner.
However, business owners may be putting themselves at risk unwittingly, if the higher contractors in their business, that should be considered employees instead. The reason why this is a problem says Edmonton bookkeeping, is because entrepreneurs do not end up withholding source deductions from the amount of money that they pay a contractor. However, if Canada revenue agency investigates and find that the contractor is actually deems an employee and should have had source of actions withheld. The business owner will then be on the hook for all of the source deductions that should have been remitted to CRA since the first day that person was hired.
That can end up being a significant amount of money, because that means that an entrepreneur will owe not just the income taxes, CPP and EI on behalf of the employee. But the business owner also must also pay CPP and EI on behalf of their business as well. Depending on how long that contractor has been working for the business owner, they can end up being a significant amount of money. On top of that, will be at percent interest penalty that will get accrued on a daily basis. Therefore, business owners may find that a small sum of money can add up very quickly.
If Canada revenue agency does not investigation because the contractor has not remitted their own source deductions, the conduct their investigation, and then let they business owner know their ruling. The business owner will have ninety days to heal, to plead their case, to hopefully get that decision overturned. However, business owners should understand that very few appeals gets the case overturned, because Canada revenue agency needs to get their taxes one way or another. If the contractor does not pay them, and they are deemed an employee, responsibility literally falls to the business owner.
However, business owners can ensure that they are avoiding this situation completely, by ensuring that the contractors that they hire our actual contractors. And if they have any question, that they draft up an employment contract. Or, Edmonton bookkeeping says another easy fix can ensure that an entrepreneur has absently no risk would be to only hire contractors that are incorporated. Once they hire corporate contractors, they risk is completely eliminated. Therefore, business owners can significantly help themselves ensure that they will never get assessed this penalty if they either have employment contracts, or ensure that all contractors are incorporated. Even if they have already hired a contractor that they are worried would be deemed an employee, they can ask that contractor to get incorporated immediately, and eliminate the risk completely.
Edmonton Bookkeeping | Withholding Source Deductions Correctly
Business owners should understand how important it is to withhold source deductions correctly says Edmonton bookkeeping. If they do this incorrectly, or if they do not remit the correct source deductions, they could end up facing big penalties in their business that could impact him financially. In fact, 50% of all businesses fail in Canada, and 29% of those businesses that fail say that the reason why they fail is because they ran out of money in their business. If business owners are able to avoid penalties from Canada revenue agency, they can ensure that they are not spending money that they need to.
Ultimately, business owners need to understand that they should be very careful when hiring contractors, to ensure that they would not actually be deemed an employee by Canada revenue agency. The reason why this is a risks is Edmonton bookkeeping, is because if a business owner hires a contractor, they are not withholding and then remitting source deductions to Canada revenue agency on their behalf. However, if the contractor themselves does not remit source of actions, Canada revenue agency will most likely end up doing an investigation.
If Canada revenue agency rules that the contractor should be considered an employee, then the business owner themselves are on the hook for remitting all of the source deductions that they owed. Even if an entrepreneur has not withheld those taxes from the contractor and the first place, there is a possibility still falls to the business owner to ensure that Canada revenue agency gets paid the taxes that are required. While a business owner may ask the contractor to pay the taxes, ultimately, the responsibility falls to the business owner to ensure that amount gets paid properly.
But will help Canada revenue agency determine who is an employee and who is a contractor be a series of about fifty questions that they will be asking that contractor as well as the business owner. What they are trying to determine, is how much control the business owner has over that worker. The more control that a business owner has, and the more likely they will be considered an employee. The less control, and the more likely that CRA will consider them as a contractor.
It will ask questions about who controls the wages that they get paid, is there a set schedule that they must adhere to, can they hire their own employees to help with the job, please for the expenses, who buys the supplies and materials, who owns the tools that the worker uses, and is there any risk associated with the job.
By being very careful on who they hire is a contractor and who they hire is an employee can help an entrepreneur avoid having to pay not only all of the source deductions of a contractor that they have hired, but ultimately, avoiding a stiff penalty that could financially cripple to business says Edmonton bookkeeping.